Notification No. FEMA. 230/2012-RB dated 29th May, 2012, notified vide G.S.R. No. 797(E) dated 30th October, 2012 read with Corrigendum dated 10th September, 2013 notified vide G.S.R. No. 624(E) dated 12th September, 2013
Foreign Direct Investment (FDI) into a Small Scale Industrial Undertakings (SSI)/Micro & Small Enterprises (MSE) and in Industrial Undertaking manufacturing items reserved for SSI/MSE
Presently, an India Company which is a small scale industrial unit and which is not engaged in any activity or in manufacture of items included in Annex A, can issue shares or convertible debentures to a person resident outside India, to the extent of 24% of its paid-up capital. The said Company can issue shares in excess of 24% of its capital if:
(a) It has given up its small scale status.
(b) It is not engaged or does not propose to engage in manufacture of items reserved for small scale sector.
(c) It complies with the ceilings specified in Annex B to Schedule I.
This circular has aligned the policy on FDI with respect to investment in Small Scale Industrial unit and in a company which has de-registered its small scale industry status and is not engaged or does not propose to engage in manufacture of items reserved for small scale sector in lines with provisions of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. As a result:
(i) A company which is reckoned as Micro and Small Enterprises (MSE) (earlier Small Scale Industries) in terms of MSMED Act, 2006 and not engaged in any activity/sector mentioned in Annex A to schedule 1 can issue shares or convertible debentures to a person resident outside India, subject to the limits prescribed in Annex B to schedule 1, in accordance with the entry routes specified therein and the provision of FDI Policy, as notified from time to time.
(ii) Any Industrial undertaking, with or without FDI, which is not an MSE, having an Industrial License under the provisions of the Industries (Development & Regulation) Act, 1951 for manufacturing items reserved for manufacture in the MSE sector can issue shares in excess of 24% of its paid up capital with prior approval from FIPB.
In terms of the provisions of MSMED Act: –
(i) In the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951: –
(a) A micro enterprise means where the investment in plant and machinery does not exceed Rs. 25 lakh.
(b) A small enterprise means where the invest ment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore.
(ii) In the case of the enterprises engaged in providing or rendering services: –
(a) A micro enterprise means where the investment in equipment does not exceed Rs. 10 lakh.
(b) A small enterprise means where the investment in equipment is more than Rs. 10 lakh but does not exceed Rs. 2 crore.
